The U.S. Job Market is Gaining Traction

The Jobless claims data came out on Thursday and the trend
is still in place and bodes well for the May Employment Report coming out next
Friday as jobless claims fell sharply in the May 24 week, down 27,000 to
300,000. The 4-week average is down a significant 11,250 to a new recovery low
of 311,500. Continuing claims are also down, falling 17,000 in data for the May
17 week to a new recovery low of 2.631 million. The 4-week average is down
33,000 to 2.655 million, also a recovery low. The unemployment rate for insured
workers, also at a recovery low, came in at 2.0 percent. Notice a pattern here,
new recovery low, new recovery low, and new recovery low.

Headhunters Buzzing Right Now

I can tell the job market is really on fire through a couple
of the measures I interact with in my daily life which shows a couple of
things, first that wages are going up, and second that headhunters are really
calling a bunch of my colleagues in Corporate America with multiple job opportunities.

But it is just not corporate jobs as the businesses in my
area post job openings along with wage info on their billboards when they
really need people, like cashiers, installers, and Car Wash Sales positions and
going by the rise in wages posted on these billboards the job market is
tightening for workers at this level as well.

Albeit we reside in an area that outperforms the overall
economy, and in some cases economies are subject to local pressures, but this
area has always outperformed, and the level of increased activity is quite
noticeable, which means business is picking up relative to previous levels.

Strong Employment Report

We expect a strong Employment report next week for another
new recovery record for consecutive months of jobs added at these levels of
200k plus, and we expect the unemployment rate to drop below 6% sooner than
most believe at this pace.

I know the doom and gloom crowd will focus on those who have
left the workforce, and sure that is an area for improvement, but it starts by
employing as many people who are in the workforce first, and then as conditions
tighten further in the job market, enticing people to work and come back into
the job market. This is related to a tightening job market where employers
lower some of their standards and wages rise, both of which we anticipate
coming down the pike over the next six months as the job market continues to strengthen.

But from an inflation standpoint if those workers never come
back to the workforce for various reasons, the pool of talent available who are
looking for a job is fought over by employers needing to fill positions, and in
some cases attracting workers to switch jobs or companies, we also have seen an
uptick in this area in the Corporate world.

Consequently what really matters for jobs is the pool who
are in the market looking for work, and if this is shrinking that is bullish
for workers’ opportunities and salaries, bad for inflation and companies
needing to fill those positions, but overall leads to a tightening job market
where the Fed will need to start normalizing interest rates to avoid runaway
inflation.

Elevated inflation would be fueled by wages rising
substantially all along the wage continuum for the first time in the post
recovery world, and the inflation numbers start trending well above the Fed`s
target, we anticipate this occurring once these wage pressures start showing up
in the data set.

Tightening in the job market carries over to all types of
positions, if an employer who used to get away with hiring contract workers to
lower costs, now has to change these positions to full-time hires and raise the
salaries to attract the talent they need to complete projects, contract
salaries end up going higher as well.

This is the area we haven`t seen a significant spike since
the recession, and we feel the entire market and employers are behind the curve
on and have become too complacent with the status quo. Employers and HR are in
for a real shock when they need to start refining their budgets and raising
wages to fill positions, they are used to always negotiating from a position of
strength, we see the tables turning in this area as the labor market continues
to tighten.

The Employment Trend is Bullish

Despite all the doom and gloom in the market, we would have
loved to have these employment numbers three years ago, jobs and the economy
are trending higher, and better times are ahead for those looking for work, and
those not looking for work, don`t be surprised if you find your services in
demand once again, as companies reach out of their comfort zone to fill
positions.